Jack-up rig to leave Homer in late March

It now looks like the Endeavour jack-up rig will move from its moorage in Homer to the rig’s first exploration site in Cook Inlet in late March, an Alaska Industrial Development and Export Authority official said Feb. 15.

AIDEA is part-owner of the rig in a partnership with Buccaneer Energy Ltd., an Australian independent oil and gas company, and Ezion Holdings, a Singapore investment company.

The Endeavour arrived in Homer last fall but its move to exploration sites in Cook Inlet was delayed by work that was left unfinished in a Singapore shipyard, AIDEA Deputy Director Jim Hemsath said in a briefing for the authority’s board. “We believe the work will be finished and the rig will be able to move out of Homer to the Cosmopolitan (exploration) site by the end of March,” Hemsath said.

In a related development, Spartan Drilling Co. of Houston has been retained as drilling contractor for the Endeavour while a lawsuit continues with the former operator, Archer Ltd.

Spartan also owns and operates a second jack-up rig operating in Cook Inlet, the Spartan 151 rig.

Getting the modifications completed for the Endeavour has been complicated by the change in the drilling contractor and a lawsuit filed against the rig owners by the former operator, Archer.

“They (Archer) had certified that the work was done in Singapore but we discovered that it was not done,” Hemsath told the AIDEA board. “We also discovered that vendors for work to be done in Homer by Archer were not being paid.”

Archer has contested the claims in its suit, filed in a Texas state court, and has also said that it was not paid on a timely basis by Buccaneer and its partners. In its statements on the issue Buccaneer said it would not pay until the work was done.

Buccaneer, AIDEA and Ezion have recently been working to secure documents from Archer to certify that some work was completed on the rig. The documents’ transmittal has been delayed by the lawsuit, Hemsath said. However, Archer is obligated to provide the documents so the transfer will eventually occur, he said.

Before the Endeavour can move, the American Bureau of Shipping must certify completion of the work, and U.S. Coast Guard approvals must be obtained.

Alaska Ship & Drydock, a Ketchikan shipyard operator, is also providing personnel to Spartan for the Endeavour work, Hemsath said.

The other jack-up rig, the Spartan 151, is now in winter storage in Port Graham, after drilling an Inlet exploration well last summer, and the summer before, for Furie Operating Alaska, a Houston-based independent.

“There are advantages to having a single operator for the two jack-up rigs in the Inlet,” Hemsath said.

The certifications for the Endeavour were initially delayed by disagreements between the Seattle branch of the American Bureau of Shipping and the Singapore branch, which had approved the work done there before the rig was moved to Alaska, but these have now been resolved, Hemsath said.

Once it receives approvals to operate, the Endeavour will drill a shallow natural gas prospect at Cosmopolitan, a prospect in Cook Inlet off Anchor Point, on the Kenai Peninsula. Buccaneer acquired the leases at Cosmopolitan from Pioneer Natural Resources.

When that is finished the rig will be moved to prospects in north Cook Inlet, on leases also owned by Buccaneer.

AIDEA owns a preferred stock equity position in the Endeavour with a stipulation that its shares be purchased by the other owners after the first few Alaska wells are drilled. The authority made the decision to invest to ensure that a jack-up rig would be brought to Cook Inlet because, at the time, it was not sure that Furie’s predecessor company, Escopeta Oil and Gas, would be able to actually get the Spartan 151 to Alaska.

Escopeta had been trying to get a Jones Act exemption so as to use a foreign-built heavy-lift vessel to move the Spartan rig from the U.S. Gulf of Mexico to Cook Inlet. The company had obtained an exemption in 2006 but financing problems delayed the move.

When Escopeta reassembled its financing in 2010 the 2006 exemption had expired, the federal administration had changed and Alaska’s Sen. Ted Stevens was no longer in the U.S. Senate.

The U.S. Department of Homeland Security, which is responsible for Jones Act enforcement, refused to renew the exemption. Escopeta continued working with the department but also moved the rig to Vancouver, British Columbia for repairs of damage suffered en route and sent the foreign ship home.

The rig was then towed to Cook Inlet by U.S. tugs, but the federal government still levied a $15 million fine for a Jones Act violation on Escopeta, which is now Furie.

Buccaneer, Ezion and AIDEA, meanwhile, brought the Endeavour from Asia on a foreign heavy-lift ship but there was no Jones Act issue because the rig was coming from a foreign port.

There are important differences between the Endeavour and the Spartan 151. The Endeavour is bigger and is capable of drilling in waters up to 300 feet deep. It can also used to do maintenance or other work on the existing offshore platforms of Cook Inlet.

The Spartan 151 is small, and is capable of drilling in waters of up to 150 feet.

However, former Escopeta president Danny Davis, in a previous interview, said the smaller rig is also less expensive to operate. That means it would be more economical than the larger Endeavour rig for drilling smaller offshore prospects.